The Supreme Court has refused a landlord permission to appeal in a case in which it sought unsuccessfully to argue that a non-reliance clause in a lease protected it from a retail tenant’s misrepresentation claim after asbestos was discovered in Barnsley warehouse bays. The landlord was ordered to pay £1.4m in damages by the High Court.
The Court of Appeal upheld the High Court ruling that the non-reliance clause constituted an unreasonable exclusion clause, in a June 2018 decision that will now stand unchallenged.
Lady Hale, Lady Black and Lord Kitchin refused the landlord permission to appeal in the case of First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396; [2018] PLSCS 110 on the basis that its application “does not raise a point of law which ought to be considered at this time bearing in mind that the case has already been the subject of judicial decision and reviewed on appeal”.
In April 2015, CDS (Superstores International), which trades as The Range, took a lease of three warehousing bays (Bays 1-3) at Dearne Mill, in Darton, Barnsley. At the same time, it also entered into an agreement for lease for the occupation of a fourth bay (Bay 4)
All the bays formed part of a building owned by First Tower Trustees and Intertrust Trustees, Guernsey-registered trustees of the Barnsley Unit Trust. However, the tenant soon discovered that all the bays were so contaminated with asbestos that they were too dangerous to enter, let alone occupy. It sought to hold the landlord to account for statements made in replies to commercial property standard enquiries (CPSEs) in which the landlord said it was unaware of any environmental problems relating to the property.
First Tower relied on clauses in the lease and agreement for lease stating that the tenant acknowledges that they were not entered into in reliance on any statement or representation made by or on behalf of the landlord.
It argued that such a “non-reliance” statement in a commercial lease did not constitute an exclusion of liability within the ambit of section 3 of the Misrepresentation Act 1967, and so did not fall foul of the test of reasonableness in the Unfair Contract Terms Act 1977 (UCTA).
However, first the High Court – which made the £1.4m damages award – then the Court of Appeal found that it was an exclusion clause, and was unreasonable under UCTA. As a result, the landlord remains liable for misrepresentation.
Discussing the implications of the Court of Appeal ruling in an On the Case podcast for EG, Clare Harman-Clark, said that, while we operate in a jurisdiction that prizes freedom of contract, “that depends crucially on the assumption the terms of such a contract have been obtained fairly”.
She said: “A party can of course relinquish its right to complain that its consent to contractual terms was obtained by misrepresentation, but UCTA provides a control mechanism to ensure that this exclusion was a fair and reasonable one to include.
“This case has highlighted how liability can arise by operation of law, independently of what the parties have agreed. With the 1967 Act and UCTA, the very existence of and the terms of a contractual estoppel must be reasonable.
“Parties cannot escape liability for misrepresentation unless it is reasonable for them to do so – and reliance on pre-contract enquiries, particularly in the context of a conveyancing transaction, will be very difficult to avoid.”
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